The Choice of Stochastic Process in Real Option Valuation
نویسندگان
چکیده
A main issue in valuation modeling is the correct choice of the stochastic process that better describes the asset price performance. Particularly, in investment projects that show a high level of managerial flexibility in conditions of uncertainty – for which it would be proposed the real option valuation models – the assumption of a specific process can have an impact not only on the project value, but also on the investment rule. This work discusses the choice of stochastic process in real options valuation and the main useful tests and theoretical considerations to give support to this task. Key-words Stochastic Process, Real Options Valuation, Geometric Brownian Motion, Mean Reversion Model, Jump Diffusion Process, Multiple Factor Models.
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